Warren Buffett and the Interpretation of Financial Statements

Warren Buffett and the Interpretation of Financial Statements

by Mary Buffett

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Overview

With an insider's view of the mind of the master, Mary Buffett and David Clark have written a simple guide to reading financial statements from Warren Buffett's successful perspective.

Product Details

ISBN-13: 9781849833196
Publisher: Simon & Schuster Adult Publishing Group
Publication date: 01/28/2011
Edition description: New Edition
Sales rank: 156,062
Product dimensions: 6.00(w) x 1.25(h) x 9.00(d)

About the Author

Mary Buffett is an author and lecturer on investing and was married to Warren's son Peter for twelve years. She and David Clark -- a longtime friend of the Buffett family who is a portfolio manager, attorney, and lecturer on the subject of Buffettology -- are the bestselling authors of the internationally acclaimed investment books Buffettology, The New Buffettology, and The Buffettology Workbook.

Mary Buffett is an author and lecturer on investing and was married to Warren's son Peter for twelve years. She and David Clark -- a longtime friend of the Buffett family who is a portfolio manager, attorney, and lecturer on the subject of Buffettology -- are the bestselling authors of the internationally acclaimed investment books Buffettology, The New Buffettology, and The Buffettology Workbook.

Read an Excerpt

CHAPTER 1
Two Great Revelations That Made Warren the Richest Person in the World

In the mid-sixties Warren began to reexamine Benjamin Graham's investment strategies. In doing so he had two stunning revelations about what kinds of companies would make the best investments and the most money over the long run. As a direct result of these revelations he altered the Graham-based value investment strategy he had used up until that time and in the process created the greatest wealth-investment strategy the world has ever seen.

It is the purpose of this book to explore Warren's tworevelations—

1. How do you identify an exceptional company with adurable competitive advantage?

2. How do you value a company with a durable competitiveadvantage?

—to explain how his unique strategy works, and how he uses financial statements to put his strategy into practice. A practice that has made him the richest man in the world.Copyright © 2008 by Mary Buffett and David Clark

Table of Contents

Introduction

Chapter 1: Two Great Revelations That Made Warren the Richest Person in the World

Chapter 2: The Kind of Business That Will Make Warren Superrich

Chapter 3: Where Warren Starts His Search for the Exceptional Company

Chapter 4: Durability Is Warren's Ticket to Riches

Chapter 5: Financial Statement Overview: Where the Gold Is Hidden

Chapter 6: Where Warren Goes to Find Financial Information

THE INCOME STATEMENT

Chapter 7: Where Warren Starts: The Income Statement

Chapter 8: Revenue: Where the Money Comes In

Chapter 9: Cost of Goods Sold: For Warren the Lower the Better

Chapter 10: Gross Profit/Gross Profit Margin: Key Numbers for Warren in His Search for Long-Term Gold

Chapter 11: Operating Expenses: Where Warren Keeps a Careful Eye

Chapter 12: Selling, General, and Administrative Expenses

Chapter 13: Research and Development: Why Warren Stays Away from It

Chapter 14: Depreciation: A Cost Warren Can't Ignore

Chapter 15: Interest Expense: What Warren Doesn't Want

Chapter 16: Gain (or Loss) on Sale of Assets and Other

Chapter 17: Income Before Tax: The Number That Warren Uses

Chapter 18: Income Taxes Paid: How Warren Knows Who Is Telling the Truth

Chapter 19: Net Earnings: What Warren Is Looking For

Chapter 20: Per-Share Earnings: How Warren Tells the Winners from the Losers

BALANCE SHEET

Chapter 21: Balance Sheet in General

Chapter 22: Assets

Chapter 23: Current Asset Cycle: How the Money Is Made

Chapter 24: Cash and Cash Equivalents: Warren's Pile ofLoot

Chapter 25: Inventory: What the Company Needs to Buy and What the Company Needs to Sell

Chapter 26: Net Receivables: Money Owed to the Company

Chapter 27: Prepaid Expenses/Other Current Assets

Chapter 28: Total Current Assets and the Current Ratio

Chapter 29: Property, Plant, and Equipment: For Warren Not Having Them Can Be a Good Thing

Chapter 30: Goodwill

Chapter 31: Intangible Assets: Measuring the Unmeasurable

Chapter 32: Long-Term Investments: One of the Secrets to Warren's Success

Chapter 33: Other Long-Term Assets

Chapter 34: Total Assets and the Return on Total Assets

Chapter 35: Current Liabilities

Chapter 36: Accounts Payable, Accrued Expenses, and Other Current Liabilities

Chapter 37: Short-Term Debt: How It Can Kill a Financial Institution

Chapter 38: Long-Term Debt Coming Due and the Troubles It Can Cause

Chapter 39: Total Current Liabilities and the Current Ratio

Chapter 40: Long-Term Debt: Something That Great Companies Don't Have a Lot Of

Chapter 41: Deferred Income Tax, Minority Interest, and Other Liabilities

Chapter 42: Total Liabilities and the Debt to Shareholders' Equity Ratio

Chapter 43: Shareholders' Equity/Book Value

Chapter 44: Preferred and Common Stock: Additional Paid in Capital

Chapter 45: Retained Earnings: Warren's Secret for Getting Superrich

Chapter 46: Treasury Stock: Warren Likes to See This on the Balance Sheet

Chapter 47: Return on Shareholders' Equity: Part One

Chapter 48: Return on Shareholders' Equity: Part Two

Chapter 49: The Problem with Leverage and the Tricks It Can Play on You

THE CASH FLOW STATEMENT

Chapter 50: The Cash Flow Statement: Where Warren Goes to Find the Cash

Chapter 51: Capital Expenditures: Not Having Them Is One of the Secrets to Getting Rich

Chapter 52: Stock Buybacks: Warren's Tax-Free Way to Increase Shareholder Wealth

VALUING THE COMPANY WITH A DURABLE COMPETITIVE ADVANTAGE

Chapter 53: Warren's Revolutionary Idea of the Equity Bond and How It Has Made Him Superrich

Chapter 54: The Ever-Increasing Yield Created by the Durable Competitive Advantage

Chapter 55: More Ways to Value a Company with a Durable Competitive Advantage

Chapter 56: How Warren Determines the Right Time to Buy a Fantastic Business

Chapter 57: How Warren Determines It Is Time to Sell

Appendix

Select Glossary of Terms

Acknowledgments

Index

Customer Reviews

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Warren Buffett And The Interpretation Of Financial Statements [With CDROM] 3.6 out of 5 based on 0 ratings. 47 reviews.
Guest More than 1 year ago
This is the Buffett book I've dreamed of for years - how he reads a financial statement. Yea, we all know he buys when others are fearful, but how does he know what to buy??? This is the book that tells us what he is looking for in a company's financial statement to see if it is a company with, what Buffett calls, a durable competitive advantage. It also tells us what price Buffett is willing to pay for it. 'Pay too much for even a great company and you lose.' And the great part about it is I actually can understand what the authors are talking about!!! They make it really simple and straight forward. I highly recommend this book!!!!
RolfDobelli More than 1 year ago
Financial statements hold clues about the future performance of a company, and Warren Buffett¿s quest to find such clues has put him among the ranks of the wealthiest people in the world, according to Buffett experts Mary Buffett (his former daughter-in-law) and David Clark. Seeing the interpretation of financial statements through Warren Buffett¿s eyes is both instructive and insightful. He routinely calculates meaningful financial ratios from line items in financial statements to distinguish the most promising companies from the rest. Although financial novices may have the most to learn from this book, the authors include savvy bits of ¿Buffettology¿ for more seasoned investors¿ benefit. getAbstract recommends this book to readers who want a basic introduction to financial statement analysis and, perhaps more importantly, who want to learn how ¿the Oracle of Omaha¿ picks his winning investments.
Anonymous More than 1 year ago
Book has 50+ Chapters detailing a specific item as it may appear on a Corporate Balance Sheet with comments as to what Buffett may look for as an investment. Excellant reference book for investing Long Term.
Nightshade_XS More than 1 year ago
Any fan of Robert Kiyosaki's book Rich Dad Poor Dad will love this book. It goes deep into the heart of financial statements. Anyone who wants to really be successful needs to read this book as it will probably change people's lives. If I could sum up in two words how valuable this book is when it comes to financial statements I would say "Warren Buffet". That is all that needs to be said about this book and how it will help anyone become a Billionaire. If you don't believe me, then you probably should stay away from the Stock Market.
Anonymous More than 1 year ago
Completely demystified financial income statements, balance sheets, and cash flow summaries for me. And that ain't bad.
warrenzzz More than 1 year ago
Great book for beginner or intermediate investor.
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Anonymous More than 1 year ago
Written in a simple, easy to understsnd way for the non-professional investor. Provides insight into how Warren Buffett selects his companies and stocks. This book will benefit any investor.
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SantaMonicaDave More than 1 year ago
Still an important text for business. I saw a comment about Rich Dad Poor Dad on here and I don't see the connection -- I think fits more with Michael Patrick's Blueprint for Billionaires or Jim Collins' Good to Great; two very solid texts that actually help in business.
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